Would you buy or sell the U.S. dollar?

Filed under: Forecasts, Other issues, Federal Reserve

The U.S. dollar is getting hammered in world markets after the Federal Reserve announced plans to buy $300 billion dollars in long-term U.S. Treasuries. When the Fed buys bonds, it creates more money and that money is pumped into the economy. More dollars have the effect of weakening a country's currency. This is what is causing the present sell off in the dollar.

For investors this creates a new dilemma. For the short term, there will be pressure on the dollar. Should you then bet on further weakness and sell short the U.S. currency? That might work. On the other hand, if the Fed is right and the U.S. economy recovers quicker than other world economies, the dollar would gain strength against other currencies. So then do you seize this opportunity and use the present dollar weakness as a chance to buy the U.S. dollar?

Continue reading Would you buy or sell the U.S. dollar?